E-procurement saves NY agency $8 million
The New York-based Metropolitan Transportation Authority (MTA) has saved $8 million on three recent purchasing contracts. The agency achieved the savings by using e-procurement and real-time online reverse auctions to make purchases. Two of the money-saving contracts, approved March 28, were for desktop computers, and custodial and security services. The contract bids came in at 51 percent and 8 percent below expectations, respectively.
In the MTA’s e-procurement setup, companies hoping to do business with the MTA log into a website that allows them to place bids in real time and simultaneously track whether they are currently the low bidder or have been underbid.
“The savings we’ve been able to achieve through our first uses of e-procurement have been well beyond our most hopeful expectations,” said MTA Chairman Joseph J. Lhota. “We are looking to expand our use of e-procurement as quickly as we can. We expect to switch to it for all of the purchases where it makes sense.”
For appropriate purchases, the MTA notifies pre-qualified vendors of the time of the online auction and invites their participation. In a regular auction, buyers set the price they’re willing to pay and the price rises. In the MTA’s reverse auctions, suppliers submit progressively lower prices within the allotted time.
Last December, after its first successful use of e-procurement, the MTA approved a contract for office supplies that reduced expenses by 17.5 percent, or $4 million, over five years.
On March 28, the MTA Board approved two contracts that had been bid out using e-procurement. One contract was for desktop and laptop computers that will be used to retire obsolete equipment and standardize equipment across MTA agencies for improved efficiency.
Because of aggressive bidding from five competitors, the MTA saved $3,038,544 over two years, or 51 percent over what it expected to pay, for the desktop computers. Similarly, the agency saved $528,733 over two years, or 46 percent, for its purchase of laptop computers. The total savings for the contract was $3.57 million. Dell Marketing, LP won the desktop part of the contract, and Derive Technologies won the laptop component.
MTA is a public benefit corporation chartered by the state of New York. MTA subways, buses and railroads provide 2.6 billion trips each year to New Yorkers, the equivalent of about one in every three users of mass transit in the United States and two-thirds of the nation’s rail riders. MTA bridges and tunnels carry nearly 300 million vehicles a year. MTA serves a population of 14.6 million people in the 5,000-square-mile area fanning out from New York City.
